Centre on Regulation and Competition WORKING PAPER SERIES

The focus of this paper is on the conceptual and empirical problems that arise in the analysis of the administrative and political context of economic and social regulation in developing countries. After a discussion of the significance of dominant ideas in current debates on economic and social development policy, the paper examines the main characteristics of regulatory governance in developed economies, since the privatisation and regulatory reforms recently introduced into developing economies are broadly modelled on developed country experience. It is argued that regulatory reforms need to be analysed in the broader context of the new public management (NPM) and governance reforms which have been spreading across both developed and developing systems of government in the last two decades. One reason for close attention to systems of governance is that in developing countries, the state is likely to retain greater responsibilities for economic and social regulation than is now the case in developed economies. In this event, ‘Western’ models of regulation will not be easily emulated or transferred because of the resistant political and administrative cultures that must receive them. The forms of this ‘reality gap’ are examined, and the implications for the reshaping of state-market relations in developing countries are considered, as well as the implications for pro-poor strategies. INTRODUCTION: THE DEBATE ON ECONOMIC DEVELOPMENT STRATEGIES Analysis of regulatory governance in developing economies immediately encounters several difficulties. First, concepts of regulatory governance and the regulatory state are still relatively new in developed economies, and are generally the product of a post-privatisation phase of neoliberal economic reform. Meanwhile, the application of these reforms to developing economies has been actively pursued, particularly by aid donors, but there has at this point been little independent evaluation of the effectiveness of this reform process, let alone of the economic results and social effects. The picture is particularly blurred in respect of the reforms, such as privatisation, contracting, and regulation, which involve a new conception of state-market relations, and so add in the complexities of governance and political institutions in developing countries. To add to this complex set of relationships, major players themselves appear now to be seriously divided about the appropriateness of current economic reforms and their relation to broader development strategies.